Archive for April, 2009

One of the problems which has helped fuel this real estate bubble has been the wild and ridiculous claims made by sprukers. The real estate industry is unique in that you can make up anything, disseminate it to the public and never expect any repercussions. If a financial advisor made such claims, they would probably be stripped off their AFS licence, yet for many the purchase of the home is the biggest investment they make.

However the law is gradually catching up with the Real Estate industry. Unfortunately it’s too little to late.

In October 2003 to January 2004, Today Tonight which airs on the seven network ran some exclusive stories on women who would become millionaires though investing in property, even if they had no money to start with.

With no reasonable grounds to make these assertions, the ACCC took aim. Channel Seven disputed the shows were deceptive and tried to seek cover under the media safe-harbour protection, an exemption in the trade practices act. But today, the High Court has found today tonight did in fact breach trade practices laws.

But such wild claims is not unusual for television.

On Sunday night, Channel 9 broadcasted a show called 2nd Chance. While it set about to help bail out families from mountains of crippling housing debt, celebrity Real Estate agent John McGrath was shown making wild claims.

He clearly stated in an orchestrated, prerecorded scene that “a lot of people are nervous about buying in this real estate market, which is understandable because it is down about 20% over the past 12 months, but if you look back over the last 100 years property prices have doubled about every 7 to 8 years. So if you are cashed up and ready to purchase, now is an outstanding time to be get into the market.”

The question one has to ask is where in earth does he get information that over the last 100 years, property prices have doubled every 7 to 8 years? What is the source for these wild claims? In ACCC speak, there is no reasonable grounds to make such assertions.

Earlier this year we reported of the Judge who teared up a property contract allowing the investor to walk away. The decision was made on the grounds that both the Real Estate agent and the promotional material made some predictions with no reasonable grounds that they would in fact come true.

The agency’s advertisements promised that Green Square, a planned business centre next to Victoria Park, would become the “next city centre in Sydney”; they forecast a seminar which would advise how to buy “the hottest investment location in Sydney” and they promised a “one-year 5 per cent rental guarantee”.

“According to Mr Zhang, he and Ms Liu were reluctantly persuaded to buy the Victoria Park terrace by being assured that the property market was continually rising; that the market doubled in value every seven years; and that in two years the terrace would definitely have increased in value,” Justice White said.

A GROWING number of NSW residents are on the cusp of losing their homes to banks and other lenders despite the steep fall in interest rates.

The number of repossession orders in the state dropped at the end of last year, as lower interest rates offered relief to borrowers struggling to repay loans, according to figures made public by the NSW Attorney-General’s Department yesterday. But that trend reversed in January, and consumer credit advocates blame an increase in joblessness.